“In the fourth quarter, Encore continued to benefit from the growing supply of charged-off credit card receivables in the U.S. market, with solid deployments at favorable prices driving higher expected returns than a year ago,” said Ashish Masih, the Company’s President and Chief Executive Officer. “In the United States and in Europe, our consumer-centric liquidation programs are also driving better results and have contributed to substantial growth in our Estimated Remaining Collections, resulting in a new all-time high for Encore.”

“2017 was a strong year for Encore in which we generated a record level of cash collections. We continue to invest in expanding our collections capacity to capitalize on the growing market opportunity in the U.S. In Europe, our subsidiary Cabot Credit Management completed its acquisition of Wescot in the fourth quarter and is now both the largest debt buyer and debt servicer in the United Kingdom.”

“2017 was also a strong year for our industry in the U.S. After growing an estimated 15% in 2016, we estimate that sales of charged-off credit card receivables in the U.S. grew by more than 20% in 2017. We believe industry supply will continue to grow in 2018 and beyond, driven by recent record levels of revolving credit in the U.S. coupled with statements made by issuers who are broadly indicating that increases in charge-off rates are expected to continue,” said Masih.

Financial Highlights for the Fourth Quarter of 2017:

Estimated Remaining Collections (ERC) grew $1.1 billion compared to the same period of the prior year, to $7.0 billion.

Investment in receivable portfolios was $301 million, including $170 million in the U.S. and $110 million in Europe, compared to $210 million deployed overall in the same period a year ago.

Gross collections were $438 million, compared to $397 million in the same period of the prior year.

Total revenues were $317 million, compared to $271 million in the fourth quarter of 2016.

Total operating expenses were $253 million, compared to $184 million in the same period of the prior year. This increase was a result of several factors including: the impact of expenses related to the withdrawn Cabot IPO; the acquisition of Wescot and related restructuring costs; tax planning related to the U.S. Tax Cuts and Jobs Act; and investments in the expansion of our collections capacity. Adjusted operating expenses were $182 million, compared to $152 million in the same period of the prior year.

Total interest expense increased to $51.7 million, compared to $48.4 million in the same period of the prior year.

GAAP net income from continuing operations attributable to Encore was $12.7 million, or $0.48 per fully diluted share, compared to $22.0 million, or $0.85 per fully diluted share, in the same period of the prior year. The decline in net income from 2016 to 2017 was largely due to the impact of expenses related to the withdrawn Cabot IPO in November 2017.

Adjusted income from continuing operations attributable to Encore was $27.7 million, compared to $18.7 million in the same period of the prior year.

Adjusted income from continuing operations attributable to Encore per share (also referred to as Economic EPS) was $1.05, compared to $0.72 in the same period of the prior year.

Available capacity under Encore’s revolving credit facility, subject to borrowing base and applicable debt covenants, was $213 million as of December 31, 2017.

Financial Highlights for the Full Year of 2017:

Investment in receivable portfolios for the full year was $1.1 billion, including $536 million in the U.S. and $464 million in Europe, compared to $0.9 billion deployed overall in 2016.

Total operating expenses were $862 million, compared to $788 million in 2016. Adjusted operating expenses were $698 million, compared to $648 million in 2016 as we invested in the expansion of our collections capacity.

Total interest expense was $204 million, compared to $198 million in 2016.

GAAP net income from continuing operations attributable to Encore was $83.4 million, or $3.16 per fully diluted share, compared to $78.9 million, or $3.05 per fully diluted share, in 2016.

Adjusted income from continuing operations attributable to Encore was $106.0 million, compared to $90.1 million in 2016.

Adjusted income from continuing operations attributable to Encore per share (also referred to as Economic EPS) was $4.04, compared to $3.48 in 2016.

Conference Call and Webcast

The Company will host a conference call and slide presentation today, February 21, 2018, at 2:00 p.m. Pacific time / 5:00 p.m. Eastern time to discuss fourth quarter and full year results.

Members of the public are invited to access the live webcast via the Internet by logging on at the Investor Relations page of Encore's website at www.encorecapital.com. To access the live, listen-only telephone conference portion, please dial (855) 541-0982 or (704) 288-0606.

For those who cannot listen to the live broadcast, a telephonic replay will be available for seven days by dialing (800) 585-8367 or (404) 537-3406 and entering the conference number 4077176. A replay of the webcast will also be available shortly after the call on the Company's website.

Non-GAAP Financial Measures

This news release includes certain financial measures that exclude the impact of certain items and therefore have not been calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). The Company has included adjusted income attributable to Encore and adjusted income from continuing operations attributable to Encore per share (also referred to as economic EPS when adjusted for certain shares associated with our convertible notes that will not be issued but are reflected in the fully diluted share count for accounting purposes) because management uses this measure to assess operating performance, in order to highlight trends in the Company’s business that may not otherwise be apparent when relying on financial measures calculated in accordance with GAAP. The Company has included information concerning adjusted operating expenses in order to facilitate a comparison of approximate cash costs to cash collections for the portfolio purchasing and recovery business in the periods presented. Adjusted income attributable to Encore, adjusted income from continuing operations attributable to Encore per share/economic EPS, and adjusted operating expenses have not been prepared in accordance with GAAP. These non-GAAP financial measures should not be considered as alternatives to, or more meaningful than, net income, net income per share, and total operating expenses as indicators of the Company’s operating performance. Further, these non-GAAP financial measures, as presented by the Company, may not be comparable to similarly titled measures reported by other companies. The Company has attached to this news release a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures.

About Encore Capital Group, Inc.

Encore Capital Group is an international specialty finance company that provides debt recovery solutions and other related services for consumers across a broad range of financial assets. Through its subsidiaries around the globe, Encore purchases portfolios of consumer receivables from major banks, credit unions, and utility providers.

Encore partners with individuals as they repay their debt obligations, helping them on the road to financial recovery and ultimately improving their economic well-being. Encore is the first and only company of its kind to operate with a Consumer Bill of Rights that provides industry-leading commitments to consumers. Headquartered in San Diego, Encore is a publicly traded NASDAQ Global Select company (ticker symbol: ECPG) and a component stock of the Russell 2000, the S&P Small Cap 600 and the Wilshire 4500. More information about the company can be found at http://www.encorecapital.com. More information about the Company's Cabot Credit Management subsidiary can be found at http://www.cabotcm.com. Information found on the company’s or Cabot’s website is not incorporated by reference.

Forward Looking Statements

The statements in this press release that are not historical facts, including, most importantly, those statements preceded by, or that include, the words “will,” “may,” “believe,” “projects,” “expects,” “anticipates” or the negation thereof, or similar expressions, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). These statements may include, but are not limited to, statements regarding our future operating results, performance, business plans or prospects. For all “forward-looking statements,” the Company claims the protection of the safe harbor for forward-looking statements contained in the Reform Act. Such forward-looking statements involve risks, uncertainties and other factors which may cause actual results, performance or achievements of the Company and its subsidiaries to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks, uncertainties and other factors are discussed in the reports filed by the Company with the Securities and Exchange Commission, including the most recent reports on Forms 10-K and 10-Q, each as it may be amended from time to time. The Company disclaims any intent or obligation to update these forward-looking statements.

Common stock, $.01 par value, 50,000 shares authorized, 25,801 shares and 25,593 shares issued and outstanding as of December 31, 2017 and December 31, 2016, respectively

258

256

Additional paid-in capital

42,646

103,392

Accumulated earnings

616,314

560,567

Accumulated other comprehensive loss

(77,356

)

(104,911

)

Total Encore Capital Group, Inc. stockholders’ equity

581,862

559,304

Noncontrolling interest

(9,929

)

(7,539

)

Total equity

571,933

551,765

Total liabilities, redeemable equity and equity

$

4,490,712

$

3,670,497

The following table includes assets that can only be used to settle the liabilities of the Company’s consolidated variable interest entities (“VIEs”) and the creditors of the VIEs have no recourse to the Company. These assets and liabilities are included in the consolidated statements of financial condition above.

Net cash provided by (used in) used in investing activities from discontinued operations

—

14,685

(52,416

)

Net cash used in investing activities

(452,131

)

(168,789

)

(472,709

)

Financing activities:

Payment of loan costs

(28,972

)

(32,338

)

(17,995

)

Proceeds from credit facilities

1,434,480

586,016

1,084,393

Repayment of credit facilities

(1,168,069

)

(615,857

)

(898,086

)

Proceeds from senior secured notes

325,000

442,610

332,693

Repayment of senior secured notes

(204,241

)

(352,549

)

(15,000

)

Proceeds from issuance of convertible senior notes

150,000

—

—

Repayment of convertible senior notes

(125,407

)

—

—

Repayment of securitized notes

—

(935

)

(44,251

)

Repurchase of common stock

—

—

(33,185

)

Proceeds from other debt

33,197

36,172

—

Payment for the purchase of noncontrolling interest

(29,731

)

(4,842

)

—

Other, net

(8,040

)

(15,024

)

(8,448

)

Net cash provided by financing activities

378,217

43,253

400,121

Net increase in cash and cash equivalents

49,904

4,796

43,561

Effect of exchange rate changes on cash and cash equivalents

12,470

(8,624

)

(14,131

)

Cash and cash equivalents, beginning of period

149,765

153,593

124,163

Cash and cash equivalents, end of period

212,139

149,765

153,593

Cash and cash equivalents of discontinued operations, end of period

—

—

29,600

Cash and cash equivalents of continuing operations, end of period

$

212,139

$

149,765

$

123,993

Supplemental disclosures of cash flow information:

Cash paid for interest

$

162,545

$

147,899

$

151,946

Cash paid for income taxes, net

44,365

60,071

84,101

Supplemental schedule of non-cash investing and financing activities:

Conversion of convertible senior notes

$

28,277

$

—

$

—

Fixed assets acquired through capital lease

3,577

55

2,220

ENCORE CAPITAL GROUP, INC.Supplemental Financial Information

Reconciliation of Adjusted Income Attributable to Encore to GAAP Net Income Attributable to Encore and Adjusted Operating Expenses Related to Portfolio Purchasing and Recovery Business to GAAP Total Operating Expenses(In Thousands, Except Per Share amounts) (Unaudited)

Three Months Ended December 31,

2017

2016

$

Per DilutedShare—Accounting

Per DilutedShare—Economic

$

Per Diluted Share— Accounting

Per Diluted Share— Economic

GAAP net income from continuing operations attributable to Encore, as reported

$

12,681

$

0.48

$

0.48

$

21,983

$

0.85

$

0.85

Adjustments:

Convertible notes non-cash interest and issuance cost amortization

3,126

0.12

0.12

3,017

0.12

0.12

Acquisition, integration and restructuring related expenses(1)

11,911

0.45

0.45

7,457

0.29

0.29

Net gain on fair value adjustments to contingent considerations(2)

(49

)

—

—

(8,111

)

(0.31

)

(0.31

)

Amortization of certain acquired intangible assets(3)

1,610

0.06

0.06

415

0.02

0.02

Expenses related to withdrawn Cabot IPO(4)

15,339

0.58

0.58

—

—

—

Income tax effect of the adjustments(5)

(4,183

)

(0.16

)

(0.16

)

(3,693

)

(0.15

)

(0.15

)

Adjustments attributable to noncontrolling interest(6)

(13,965

)

(0.53

)

(0.53

)

(2,402

)

(0.10

)

(0.10

)

Impact from tax reform(7)

1,182

0.05

0.05

—

—

—

Adjusted income from continuing operations attributable to Encore

$

27,652

$

1.05

$

1.05

(8

)

$

18,666

$

0.72

$

0.72

________________________

(1) Amount represents acquisition, integration and restructuring related expenses. We adjust for this amount because we believe these expenses are not indicative of ongoing operations; therefore adjusting for these expenses enhances comparability to prior periods, anticipated future periods, and our competitors’ results.

(2) Amount represents the net gain recognized as a result of fair value adjustments to contingent considerations that were established for our acquisitions of debt solution service providers in Europe. We have adjusted for this amount because we do not believe this is indicative of ongoing operations.

(3) As we continue to acquire debt solution service providers around the world, the acquired intangible assets, such as trade names and customer relationships, have grown substantially, particularly in recent quarters. These intangible assets are valued at the time of the acquisition and amortized over their estimated lives. We believe that amortization of acquisition-related intangible assets, especially the amortization of an acquired company’s trade names and customer relationships, is the result of pre-acquisition activities. In addition, the amortization of these acquired intangibles is a non-cash static expense that is not affected by operations during any reporting period. As a result, the amortization of certain acquired intangible assets is excluded from our adjusted income from continuing operations attributable to Encore and adjusted income from continuing operations per share.

(4) In October 2017, Cabot announced its intention to proceed with an initial public offering and to apply for admission of its ordinary shares to the premium listing segment of the Official List of the Financial Conduct Authority and to trade on the main market for listed securities of the London Stock Exchange. In November 2017, Encore announced that Cabot has decided to not go forward with its previously announced initial public offering as a result of poor performance of other IPOs on the London Stock Exchange and unfavorable equity market conditions in the U.K. We believe these expenses are not indicative of ongoing operations, therefore adjusting for these expenses enhances comparability to prior periods, anticipated future periods, and our competitors’ results.

(5) Amount represents the total income tax effect of the adjustments, which is calculated based on the applicable marginal tax rate of the jurisdiction in which the portion of the adjustment occurred.

(6) Certain of the above pre-tax adjustments include expenses recognized by our partially-owned subsidiaries. This adjustment represents the portion of the non-GAAP adjustments that are attributable to noncontrolling interest.

(7) As a result of the U.S. Tax Cuts and Jobs Act (the “Tax Reform Act”), we incurred a net additional tax expense of approximately $1.2 million. We believe the Tax Reform Act related expenses are not indicative of our ongoing operations, therefore adjusting for these expenses enhances comparability to prior periods, anticipated future periods, and our competitors’ results.

(8) Adjusted income from continuing operations attributable to Encore per economic share includes $0.40 of adjustments to Cabot’s EPS contribution after tax and noncontrolling interest, consisting primarily of a portion of expenses related to the withdrawn Cabot IPO as well as restructuring charges related to Cabot’s acquisition of Wescot.

Year Ended December 31,

2017

2016

$

Per DilutedShare—Accounting

Per DilutedShare—Economic

$

Per Diluted Share— Accounting

Per Diluted Share— Economic

GAAP net income from continuing operations attributable to Encore, as reported

$

83,427

$

3.16

$

3.18

$

78,923

$

3.05

$

3.05

Adjustments:

Convertible notes non-cash interest and issuance cost amortization

12,353

0.47

0.47

11,830

0.46

0.46

Acquisition, integration and restructuring related expenses(1)

16,628

0.63

0.63

17,630

0.68

0.68

Net gain on fair value adjustments to contingent considerations(2)

(2,822

)

(0.11

)

(0.11

)

(8,111

)

(0.31

)

(0.31

)

Settlement fees and related administrative expenses(3)

—

—

—

6,299

0.24

0.24

Amortization of certain acquired intangible assets(4)

3,561

0.13

0.14

2,593

0.10

0.10

Expenses related to withdrawn Cabot IPO(5)

15,339

0.58

0.58

—

—

—

Income tax effect of the adjustments(6)

(7,936

)

(0.30

)

(0.30

)

(12,577

)

(0.49

)

(0.49

)

Adjustments attributable to noncontrolling interest(7)

(15,720

)

(0.60

)

(0.60

)

(6,461

)

(0.25

)

(0.25

)

Impact from tax reform(8)

1,182

0.05

0.05

—

—

—

Adjusted income from continuing operations attributable to Encore

$

106,012

$

4.01

$

4.04

$

90,126

$

3.48

$

3.48

________________________

(1) Amount represents acquisition, integration and restructuring related expenses. We adjust for this amount because we believe these expenses are not indicative of ongoing operations; therefore adjusting for these expenses enhances comparability to prior periods, anticipated future periods, and our competitors’ results.

(2) Amount represents the net gain recognized as a result of fair value adjustments to contingent considerations that were established for our acquisitions of debt solution service providers in Europe. We have adjusted for this amount because we do not believe this is indicative of ongoing operations.

(3) Amount represents litigation and government settlement fees and related administrative expenses. For the year ended December 31, 2016, amount consists of settlement and administrative fees related to certain TCPA settlements. We believe these fees and expenses are not indicative of ongoing operations, therefore adjusting for these expenses enhances comparability to prior periods, anticipated future periods, and our competitors’ results.

(4) As we continue to acquire debt solution service providers around the world, the acquired intangible assets, such as trade names and customer relationships, have grown substantially, particularly in recent quarters. These intangible assets are valued at the time of the acquisition and amortized over their estimated lives. We believe that amortization of acquisition-related intangible assets, especially the amortization of an acquired company’s trade names and customer relationships, is the result of pre-acquisition activities. In addition, the amortization of these acquired intangibles is a non-cash static expense that is not affected by operations during any reporting period. As a result, the amortization of certain acquired intangible assets is excluded from our adjusted income from continuing operations attributable to Encore and adjusted income from continuing operations per share.

(5) In October 2017, Cabot announced its intention to proceed with an initial public offering and to apply for admission of its ordinary shares to the premium listing segment of the Official List of the Financial Conduct Authority and to trade on the main market for listed securities of the London Stock Exchange. In November 2017, Encore announced that Cabot has decided to not go forward with its previously announced initial public offering as a result of poor performance of other IPOs on the London Stock Exchange and unfavorable equity market conditions in the U.K. We believe these expenses are not indicative of ongoing operations, therefore adjusting for these expenses enhances comparability to prior periods, anticipated future periods, and our competitors’ results.

(6) Amount represents the total income tax effect of the adjustments, which is calculated based on the applicable marginal tax rate of the jurisdiction in which the portion of the adjustment occurred.

(7) Certain of the above pre-tax adjustments include expenses recognized by our partially-owned subsidiaries. This adjustment represents the portion of the non-GAAP adjustments that are attributable to noncontrolling interest.

(8) As a result of the Tax Reform Act, we incurred a net additional tax expense of approximately $1.2 million. We believe the Tax Reform Act related expenses are not indicative of our ongoing operations, therefore adjusting for these expenses enhances comparability to prior periods, anticipated future periods, and our competitors’ results.

Adjusted operating expenses related to portfolio purchasing and recovery business

$

181,523

$

152,177

$

697,926

$

648,424

________________________

(1) Operating expenses related to non-portfolio purchasing and recovery business include operating expenses from other operating segments that primarily engage in fee-based business, as well as corporate overhead not related to our portfolio purchasing and recovery business.

(2) Amount represents acquisition, integration and restructuring related operating expenses. We adjust for this amount because we believe these expenses are not indicative of ongoing operations; therefore adjusting for these expenses enhances comparability to prior periods, anticipated future periods, and our competitors’ results.

(3) Amount represents the net gain recognized as a result of fair value adjustments to contingent considerations that were established for our acquisitions of debt solution service providers in Europe. We have adjusted for this amount because we do not believe this is indicative of ongoing operations.

(4) Amount represents litigation and government settlement fees and related administrative expenses. For the year ended December 31, 2016, amount consists of settlement and administrative fees related to certain TCPA settlements. We believe these fees and expenses are not indicative of ongoing operations, therefore adjusting for these expenses enhances comparability to prior periods, anticipated future periods, and our competitors’ results.

(5) In October 2017, Cabot announced its intention to proceed with an initial public offering and to apply for admission of its ordinary shares to the premium listing segment of the Official List of the Financial Conduct Authority and to trade on the main market for listed securities of the London Stock Exchange. In November 2017, Encore announced that Cabot has decided to not go forward with its previously announced initial public offering as a result of poor performance of other IPOs on the London Stock Exchange and unfavorable equity market conditions in the U.K. We believe these expenses are not indicative of ongoing operations, therefore adjusting for these expenses enhances comparability to prior periods, anticipated future periods, and our competitors’ results.